Report: Over 650 Offshore Gaming Companies Avoid GST

The GST department has identified 658 offshore online gaming companies as non-registered or non-compliant and has launched investigations against them. Additionally, 167 URLs/websites have been suggested for blocking.

In its annual report, the Directorate General of GST Intelligence (DGGI) revealed that real money online gaming companies are the largest tax evaders, with Rs 82,000 crore in evasion detected for FY24. This accounts for 41% of the total Rs 2 lakh crore in evasion identified during the year.

The DGGI Annual Report indicates that the department has taken action against 118 domestic online gaming companies and issued Show Cause Notices to 34 taxpayers, involving a total tax amount of Rs 1,10,531.91 crore. The department also notes that taxing offshore gaming companies poses a challenge due to their establishment in opaque tax havens such as Malta, Curacao Islands, the British Virgin Islands, and Cyprus.

“There are online gaming platforms who keep on changing their URL/website/apps to avoid tax compliance. Use of dark web or VPN based platforms for such supply further accentuates the difficulties in tax law enforcement,” says the DGGI Annual report.

In FY24, the GST department successfully collected Rs 2,675 crore from 574 offshore entities providing digital services to Indian businesses. This represents a significant increase in annual revenue from offshore entities, up from Rs 80 crore in FY 2017-18 to Rs 2,675 crore in FY24.

In GST terminology, services provided via the internet or electronic networks are classified as Online Information and Database Access or Retrieval (OIDAR) services. This category encompasses cloud services, digital content, online gaming, online advertising, and similar offerings. The DGGI states that when such services are supplied by an offshore entity within a taxable territory, the supplier is required to obtain registration and fulfill GST obligations.

The fact that service providers are based abroad and are obligated to pay tax to the Indian government presents challenges for GST enforcement. However, DGGI's efforts to engage with these suppliers have led many of them to obtain registration and fulfill their tax obligations. According to the DGGI, many offshore service providers are initially unaware of the legal requirements, but once informed clearly about the regulations, they agree to comply with the GST mandate.

The department has identified companies such as Udemy Inc (USA), Canva Pty (Australia), OVH Group (France), and Blackboard (Netherlands) as having registered and paid substantial tax liabilities due to DGGI's efforts. However, the DGGI's annual report for FY24 also highlights that some entities remain non-cooperative and seem to deliberately avoid tax compliance.

This includes various online casinos based in tax havens like Malta, Cyprus, Curacao, and the British Virgin Islands. Additionally, there are other entities that are challenging to reach due to their use of VPNs or cloud-based platforms.